Is There a Time Limit on Making a Revocable Trust Before Entering a Nursing Home?
Is there a time limit on making a revocable trust before someone has to enter a nursing home?
Medicaid pays for over half of the nation's nursing home costs. To be eligible for Medicaid coverage of nursing home care, a person must have very low income and assets. Some people try to give away or hide their assets before applying for Medicaid, hoping by that strategy to keep their savings in their family but still have Medicaid pay for long-term care. Congress has passed a law to stop this asset-hiding. Now, any asset given away or transferred by a Medicaid applicant to someone else for less than its true value within 60 months of applying for Medicaid nursing home care is still considered as belonging to the applicant.
The other Medicaid rule that applies here makes a revocable trust useless as a Medicaid asset transfer no matter when it's created. That's because the person who creates a revocable trust -- also called a living trust -- still has full control over the assets in the trust. Because the person making the revocable trust could revoke it at any time and use the money in it, Medicaid counts the funds in the trust as still belonging to that person, thereby disqualifying the person from Medicaid coverage.
Another option is an irrevocable trust which the attorney for my mom recommended as her condition worsened. This trust can not be used by the creator, it in essence says the money is not theirs anymore, therefore doesn't count towards Medicaid. I am the trustee for this account, and this is what I use to pay Mom's bills. We have a Living Trust with a checking account in it for Mom to write checks against when she wants something. Since we have created the Irrevocable Trust she has declined significantly and couldn't handle even paying for something in cash. It is relatively easy since I am an only child, so I don't have others that I have to get agreement on as to how to spend her money.
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